Ad hoc Committee on Public Enterprises

1
Ad hoc Committee on Public Enterprises

• Presenter Dr M Eugene Mokeyane
• Director-General
• Date 09 June 2004

2
OUTLINE

• Vision, Mission and Mandate
• Overview
• Objectives
• Departmental Focus Strategic Shift
• Programmes
• Work Ahead
• Conclusion

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VISION, MISSION AND MANDATE

• Vision
• Excellence in Shareholder Management
• Mission
• To provide an enhanced shareholder management
  system, inclusive of restructuring in support of
  promoting economic efficiency towards a better
  life.
• Mandate
• To date, the focus has been to Create and
  implement restructuring framework for SOEs
• To date development of performance monitoring
  systems

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OUR PURPOSE

• THIS MEANS THAT WE
• 1. Enable government to make sound decisions
• What businesses to stay in
• What to expect of them
• Infrastructure Investment
• Coordination of the infrastructure investment
• What businesses to restructure or exit
• How to do it best
• 2. Facilitate communication between SOEs and
  Government
• Strategy
• Critical issues Infrastructure Investment and
  Coordination among SOEs
• Performance
• Opportunities threats
• Needs
• 3. Inspire optimum performance of SOEs

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HITHERTO, RESTRUCTURING OBJECTIVES

• Social
• Restructuring to ensure meaningful wider
  participation in South African mainstream economy
• Promote Broad-based Black Economic Empowerment
• Mitigate possible negative impact arising from
  restructuring
• Promote sustainable employment either directly or
  indirectly
• Greater participation by labor in the development
  of restructuring models for energy, (rail)
  transport and defense
• Greater alignment of these objectives with larger
  strategic objectives of infrastructure investment
  and coordination of investment.

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OVERSIGHT OBJECTIVES

• Commercial
• Increase efficiency and competitiveness
• Ensure input costs of utilities are priced at
  levels that increase access thereto by most and
  ultimately all of our people
• Exercise greater oversight over the performance
  of SOEs through Shareholder Compacts and Protocol
  on Corporate Governance

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RESTRUCTURING AND OVERSIGHT TARGETS

• Corporate Governance
• Heighten corporate governance
• Integrate corporate governance to enterprise
  operations
• Alignment of SOE business activities with
  Government developmental agenda.
• Increase levels of infrastructure investment and
  coordination thereof among SOEs

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SA Governments commercial results machine
STAKEHOLDERS
SAFCOL
TRANSNET
DPE
CABINET
ALEXKOR
MINISTER CABINET
DENEL
ARIVIA
ESKOM
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CRITICAL MEASURES OF SOE PERFORMANCE
ECONOMIC/FINANCIAL
SOE
SOCIAL IMPACT
CUSTOMER
ENVIRONMENT
ORGANISATION
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DPE Strategy

• Clear SOE mandates
• Proactive communication

STAKEHOLDER RELATIONSHIPS
DPE is the steward of governments commercial
assets
KNOWLEDGE
PROCESSES

• SOE industry environment
• SWOT Analysis

• SOE reporting
• Management governance

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DPE HITHERTO ORGANISATIONAL STRUCTURE
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Performance Monitoring and Benchmarking

• Programmes

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PERFORMANCE MONITORING

• Exercise robust oversight over SOEs through
  comprehensive monitoring and reporting systems
• Promote accountability of SOEs
• Achieve sustainable excellence in SOE performance
• Increase SOE Infrastructure investment
• Identify SOE opportunities

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INTERNATIONAL RELATIONS

• Ensuring SOEs particpation in National Bilateral
  Co-operation agreements for e.g BNCs
• Identify international business opportunities for
  SOEs and formulate action plans
• Promote and monitor the participation of SOEs in
  NEPAD initiatives

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INVESTMENT PROMOTION AND MONITORING

• Assessments of all Investment proposals in terms
  of Section 54 of the PFMA
• Monitoring performance through the Investment
  Map System
• Developing investment frameworks for SOEs

Database System for SOE investments in Africa
and abroad
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SOCIO ECONOMIC PERFORMANCE MONITORING

• Integrating Government socio- economic objectives
  into SOEs
• Influencing SOE socio-economic responsibility by
  defining a socio-economic indicator framework
• Monitoring SOE Employment Equity and BEE
  practices
• Corporate Social Investment
• Managing Social Plans, ESOPs and Community
  participation in restructuring
• Institutionalising sustainability reporting of
  SOEs
• Managing the impact of HIV/AIDS

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RISK MONITORING (GREATER EMPHASIS)

• Analysing, monitoring and evaluating SOE risk
  management strategies and plans of SOEs
• Monitoring Pension funds, Medical and
  Environmental risks
• Monitoring financing, hedging and derivative
  structures that SOEs are using
• Developing risk management framework for SOEs
• Developing and implement IT risk monitoring tool

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FINANCIAL PERFORMANCE

• Interpretation and analysing of financial
  statements on a quarterly and annual basis
• Develop quarterly and annual template based on
  GAAP for SOE financial reporting
• Ensure tabling of annual financial statements
  within the prescribed time frames as per the PFMA
• Monitor guarantees on a quarterly basis through
  the guarantee exposure monitoring system (GEMS)
• Evaluate business case for the issuing of
  guarantees by guarantee certification Council
  (GCC)
• Evaluate Funding plans of SOEs

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Shareholder Management and Regulatory Services

• Programmes

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CORPORATE GOVERNANCE AND ADMINISTRATION

• Underscoring the premium that investors are
  prepared to pay for organisations that are well
  governed
• Highlighting the fiduciary duties of directors
• Fostering a culture of good governance and
  zero-tolerance to deviation
• Develop a probity framework to assess fit and
  proper status of potential board members to SOE
  boards
• Develop a Board Performance Evaluation Matrix to
  evaluate performance of directors
• Ensuring that appropriately qualified people
  with outstanding qualities are appointed to the
  boards of SOEs
• Ensuring directors are appropriately and
  adequately remunerated

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REGULATORY, ETHICAL, PROBITY ISSUES AND
INTERVENTIONS

• Assess ethical environment of SOEs
• A Common Framework for Corporate Ethics in SOEs
• A framework for a Probity Standards
• Advocate compliance and ethical behaviour by SOEs
• Develop intervention measures to ensure
  compliance
• Interpretation of SOE regulatory, legislative
  frameworks
• Development of intervention measures to assist
  SOEs in implementation thereof
• Hotline for the reporting of service delivery
  concerns and corruption committed by employees of
  SOEs by the public
• Development and implementation of Stakeholder
  Communication strategy

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Restructuring

• Programmes

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RESTRUCTURING HIGHLIGHTS

• TRANSNET
• Transnet Model
• Phase 1 Technical Review of the Holding Company
• completed
• Phase 2 Financial Analysis of the Group
  underway.
• Phase 3 Recapitalisation and efficiency
  improvements
• Change in SOE management focusing on financial
  solvency, investment requirements and funding
  management systems.
• Line by Line analysis on low density Spoornet
  lines
• completed

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RESTRUCTURING HIGHLIGHTS

• TRANSPORT

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RESTRUCTURING HIGHLIGHTS

• ESKOM

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RESTRUCTURING HIGHLIGHTS

• FORESTRY
• COMMUNITY EMPOWERMENT
• Shareholding
• Communities 10
• Employees 9
• Benefits
• Rental payments on land lease arrangements to
  date have yielded R25 million.
• 1 226 permanent jobs to be retained for three
  years
• New contract employment opportunities to be
  created
• Access to forest plants
• Forestry based enterprises,e.g. beekeeping started

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RESTRUCTURING HIGHLIGHTS

• Building Valuation through Corporate Governance
• Appointment of directors now more transparent,
  and takes into account relevant skills and
  committees of the Board
• Remuneration Policy formally adopted and
  implemented to achieve parity in remuneration
  levels in SOEs and in the public sector
• Annual Reports of SOEs are already disclosing
  directors emoluments
• Ongoing Director development programs

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WORK AHEAD TRANSPORT

• Aviation
• SAAs role in promoting Government's strategic
  objectives
• Finalise SAAs financial stability
• Developing restructuring plan for ACSA

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WORK AHEAD- MINING

• Alexkor
• Continue negotiations with the Richtersveldt
  community to finalise compensation agreement with
  regard to land rights

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WORK AHEAD - ENERGY

• ESKOM

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WORK AHEAD CORPORATE GOVERNANCE

• CORPORATE GOVERNANCE
• Systems implementation to improve reporting by
  SOEs to enhance oversight
• Performance Incentive Schemes in SOEs to be
  evaluated and benchmarked
• Performance evaluation of SOE Boards.

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BUDGET VOTE 09 2004/2005

• Programmes

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VOTE 09 DPE BUDGET 2004/2005
NOTE A material portion of the 2002/2003 budget
was dedicated to the Telkom Initial Public
Offering (IPO), hence the significant differences
between that fiscal period and the more recent
ones, including this years budget.
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Programme 1 - Administration
Budget for the year ending 31 March 2005
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Programme 2- Restructuring
Budget for the year ending 31 March 2005
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Programme 3 - Performance Monitoring
Benchmarking
Budget for the year ending 31 March 2005
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Programme 4- Policy Development
Budget for the year ending 31 March 2005
The Policy Development and Business Planning
Programme was initiated during the past fiscal
period. It did not have a stand-alone budget of
its own at the time. This is the first year that
it has been completely budgeted for.
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Conclusion

• The restructuring programme has been a steady
  success so far and is still on track, going
  forward
• Restructuring is continuous value unlocking
  marked by emphasis on mixed options and retention
  of strategic stakes
• Efficiency and operational improvements have to
  be introduced and/or sustained in all SOEs
• It is becoming increasingly vital to direct SOEs
  in improving the quality of the life of our
  people
• Broader and greater participation of blacks in
  the economy through BEE strategies ranging from
  procurement to ownership
• Increased public infrastructure investment and
  socio-economic role and impact for SOEs